Natural and organic products had a record year in 2020, growing 12.7% to $259 billion in sales. Sales were fast-tracked by the pandemic, as consumers cooked more meals at home in quarantine and developed a greater interest in healthier food and beverages.
“2020 was a challenging year. But natural and organic brands face a bright future. We are positioned where a growing number of consumers are headed,” says Carlotta Mast, senior vice president and market leader at New Hope Network. Mast shared industry highlights during her State of Natural & Organic address at New Hope’s Spark Change virtual conference earlier this month.
Natural and organic food and beverages (39%of total sales) and functional food and beverages (31%) dominate the industry. The natural and organic category alone grew 13% to $186 billion in sales. Produce accounted for 24% of those sales. Beverages were 17% of the total; dairy, 15%; packaged/prepared foods, 13%; breads and grains, 11%; snacks, 8%; meat, fish and poultry,7% and condiments, 5%.
Here are some key trends from this banner sales year:
- Consumers Prioritize Health
Consumers want immunity-boosting foods. Brands should consider adding vitamins and minerals to their products, as nutrient-dense food will be core to the future of food production.
Nutrient density “is very difficult to market,” says Nick McCoy, managing director and co-founder of Whipstitch Capital, a food-focused investment bank. “It manifests itself as superfoods over time, but it’s one of these things, if you’re in a natural grocery store, historically not many shoppers are going to take the time to read the label. It’s really encouraging to see that this is reversing.”
Adds Kathryn Peters, executive vice president at SPINS, a data company for the natural and organic industry: “Consumers are expecting more from the products they buy. But another key piece is consumers are expecting more density of nutrition in the products they buy.”
- Wellness is Challenging to Maintain
Consumers are focusing on health and wellness more than ever — 77% of New Hope Network survey respondents said personal health is more important to them now than it was in 2019.
But research shows consumers are struggling to maintain healthy lifestyles. People said they ate more junk food, exercised less, felt more anxious and slept less during 2020. Binge drinking is up an alarming 41% among women since the start of the pandemic.
Brands, Mast says, can help people fix bad habits.
“I think this is our big opportunity for 2021 and beyond,” Mast says.
- Diet as Lifestyle
SPINS’ Peters says she anticipates that, “as we look to resurrect our former selves,” shoppers will look for new eating plans, ones they can personalize to their needs.
She highlighted a few trends. Consumers want less sugar and fewer carbs and additives. They’re also shifting buying habits based on the trend to Paleo and Keto diets. Plant-based products, too, are estimated to grow at twice the rate of their traditional counterparts. Plant-based products grew 30% from 2019 to 2020, hitting $5.7 billion in sales.
Pantry staples, frozen foods, meat/fish/poultry and plant-based alternatives experienced the highest growth rates. Snack foods and packaged and prepared foods — which had previously experienced large sales gains — took big hits in 2020 as fewer people chose grab-n-go offerings during quarantine.
“How is your brand interacting with what consumers are looking for today?” Peters says.
- Multicultural Foods Grow
Of health and wellness products in the U.S., only 20% are multicultural, according to the Nutrition Business Journal.
“That tells me there’s a lot of room for better-for-you multicultural foods to grow into the profile of all the other categories,” Whipstitch’s McCoy says.
- Differing Preferences for eCommerce or Brick-and-Mortar
The pandemic accelerated ecommerce sales, which grew 60% in 2020, generating $16.5 billion. Natural products are outpacing traditional ones in ecommerce, with natural product shoppers spending nearly twice as much as those who buy “traditional” items via ecommerce. And, while “traditional” shoppers spend 22% of their dollars at WalMart, natural product shoppers only use WalMart for 12% of their purchases.
“As you all know, organic is mainstream now,” Mast continued, noting that natural sales remained high in 2020 even as unemployment rates soared. “During other economic downturns that we’ve experienced, the organic sector has typically taken a hit when it comes to sales growth. But not in 2020.”